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S. Vaidya Nathan

AN INVESTMENT may be considered in Kotak MNC Fund to capitlise on a portfolio that owns stocks with potential for further gains, especially in the engineering and pharmaceutical space.

It may also withstand any broad-based decline without much damage. Investors could, however, use a systematic investment plan to take exposures over a period as it would enable them to take advantage of any weakness in equity prices.

The fund's track record over the past three years has been fairly impressive, with annual returns of about 35 per cent. Over the past year, the NAV has rsien about 45 per cent. The fund has outpaced benchmark indices and several diversified equity funds comfortably. Its long-term track record still bears the scars of its launch when the meltdown in equities had just started in 2000.

As we had indicated in our `buy' call on this fund last November, the portfolio appears well placed to capitalise on growth trends in the economy. Its performance in the highly volatile first quarter of 2005, too, is a source for comfort. Its NAV posted modest gains, a creditable showing for a diversified fund in a difficult quarter.

Suitability: The risks associated with the fund are in line with a typical diversified portfolio. This fund should complement a set of equity funds such as HSBC Equity, Prima, HDFC Long Term Advantage, Reliance Vision, HDFC TaxSaver and Magnum Contra, a few of the shortlist of funds that we believe should be core holdings.

Kotak MNC has a long way to go before it graduates to such a status. But it could provide a good diversification option and a focussed exposure to a portfolio that could deliver value gains. Investors could choose the dividend re-investment option, as it would ensure they benefit from tax exemption while remaining invested.

Portfolio overview: The fund has about 25 per cent of its assets in pharmaceutical stocks with GlaxoSmithKline, Aventis and Pfizer as its key holdings.

It has opted for several mid-cap stocks such as Atlas Copco, Goodlass Nerolac, Sesa Goa (it exited the stock after the sharp rise in price), Monsanto, KPIT Cummins and MICO; this has paid rich dividends.

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